Long service leave is a period of leave an employee can take after working for the same business for a long period of time. Different rules and legislation apply in each state of Australia, so check to see the rules that apply to your business. The FairWork website is a good place to start.

Set up long service leave categories

You'll need to create an entitlement category to track long service leave owed, and a wage category to track the amounts paid to employees.

Set up a long service leave entitlement category

For the Calculation Basis, choose how you want to calculate the leave accrual.

If your employees are paid:

Hourly: Choose Equals [x] Percent of [Gross Wages]. Click Exempt to select any categories that shouldn’t be included in the calculation, such as overtime. Then click OK.

Use this formula to calculate the correct percentage:

(Total hours entitled / Total number of working hours over eligibility period) x 100 = %

Example 1: Say your employees work a 38 hour week (7.6-hours x 5 days). After 10 years of continuous service they’re entitled to 1 week of leave for every 60 weeks they’ve worked. So, after 10 years of continuous service, they’re entitled to 8.6667 weeks of long service leave.

Employees who remain linked to this entitlement will continue to accrue leave at the rate of 32.9340 hours per year.

Example 2: Say your employees work a 38 hour week (7.6-hours x 5 days). After 10 years of continuous service they’re entitled to 13 weeks of leave (494 hours). They also continue to accrue leave at the rate of 1.3 weeks per year.

Employees who remain linked to this entitlement will continue to accrue leave at the rate of 49.4 hours per year.

Salary: Choose the Equals [x] Hours per [Year] option.

Enter the number of hours the employee accrues in long service leave each year. These examples might help you calculate the correct rate for your business.

Example 1: Say your employees work a 38 hour week (7.6-hours x 5 days). After 10 years of continuous service they're entitled to 1 week of leave for every 60 weeks they’ve worked. So, after 10 years of continuous service, they're entitled to 329.3346 hours (8.6667 weeks) of long service leave.

In this case you would enter 32.9335 as the rate per year.

Example 2: Say your employees work a 38 hour week (7.6-hours x 5 days). After 10 years of continuous service they're entitled to 13 weeks of leave (494 hours). They also continue to accrue leave at the rate of 1.3 weeks per year.

In this case you would enter 49.4 as the rate per year.

If you want to show the hours the employee is entitled to on the employee pay advices, select the Print on Pay Advice option.

Select the Carry Entitlement Over to Next Year option.

In the Linked Wages Category field, select the Long Service Leave wage category.

Click Employee and select the employees who are currently entitled to long service leave and then click OK.

When an employee chooses to take their long service leave, enter the hours they are taking in the Hours column of the wage category. Be sure to remove any Base Salary and Base Hourly hours and amounts to ensure the employee isn't overpaid.

The hours they are entitled to take will automatically be reduced by the hours you enter for the wage category. Also, because you chose the option Automatically Adjust Base Hourly or Base Salary Details when setting up the wage category, and hourly or salary values on the pay will be adjusted accordingly.

What if I have employees that accrue at different rates or if I have a combination of hourly and salaried employees?

How do I pay pro-rata long service leave?

When an employee leaves before they are eligible to take their accrued long service leave, they might be entitled to a pro-rata payment.

Whether or not the employee is eligible to receive this payment, and how that payment is calculated, depends on the regulations in your state or territory. Check the Fairwork website for more information.

To pay pro-rata long service leave:

Set up the wage category as described above.

Enter the pro-rata hours against the long service leave wage category on the employee's final pay.